Euro-zone Currency Conversions: Commission (Hansard, 18 January 1999)

§ Lord McIntosh of Haringey
My Lords, this is primarily a matter for the banks and governments of member states participating in economic and monetary union and for the Commission.

§ Baroness Ludford
My Lords, in thanking the noble Lord for that reply, perhaps I may express a little disappointment. After all, many British people will acquire euros in travellers cheques or as part payment to small businesses or part payment in salary, but when they go abroad they may be charged 4 per cent. commission. Does the Minister agree that when the single currency offers so many advantages it would be unfortunate if we did not allow the British public to have the advantages of the euro? Does he further agree that the Government should take a more pro-active stance in order to protect British travellers from profiteering banks which charge around 4 per cent. commission?

§ Lord McIntosh of Haringey
My Lords, as to conversion between sterling and the euro, the position is no different from conversion between sterling and any of the currencies of the 11 member countries. Therefore, there is no reason to suppose that there should be any reduction in charges. The only time it will affect either the banks or British travellers abroad is when they are converting between one country and another. That indeed is a matter for the banks and the Commission. The Commission has taken a view that conversion between one currency and another in the 11 should be virtually free of transaction costs.

§ Viscount Bridgeman
My Lords, will the Minister assure us that the Government have taken careful note of the Commission's recommendations of 23rd April regarding transparency, under which transaction costs must be clearly separated from the transaction itself? In the light of that, does he not agree that there is quite enough competition already?

§ Lord McIntosh of Haringey
Yes, my Lords. We certainly agree with the statement to which the noble Viscount referred. He made a valid point about competition. If there is, as the noble Baroness, Lady Ludford, suggested in her supplementary 365 question, profiteering on the part of banks, they are all subject to competition; notably, from the various exchange bureaux which have sprung up in recent years around Europe and the world.

§ Lord Marsh
My Lords, does the Minister not agree that a good deal of this misunderstanding arises out of the Government's probably deliberately misleading attempt to give the impression that there is something very special about the euro? To avoid such misunderstanding among well informed people, would it not be useful if the Government issued some kind of propaganda to point out that there is, as he rightly said, no difference between trading in pounds, dollars, euros or any other currency?

§ Lord McIntosh of Haringey
My Lords, I do not accept for a moment that the Government have been issuing misleading propaganda. It is the responsibility of this Government to ensure that, as far as possible, businesses in this country are prepared for changes in the euro as they will have to set up accounts in an additional currency and they will benefit from the transactional costs. For example, I used to commission survey research in six or seven European countries at the same time. All of them could now bill me in euros rather than in six or seven different currencies which have to be converted, one between another. The exchange risks involved in that made it very much easier for me—or would have made it easier if I had still been in business—to quote a precise price for my clients.

§ Baroness Williams of Crosby
My Lords, are the Government aware that many in business and in the City very much welcome the steps taken by the Government to ensure that we are fully prepared for the euro, whether or not we enter the single currency? Some of us feel that the time is ripe for the Government to mount a much stronger campaign than the ones they have embarked on so far.

§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Baroness for her comments. If I may return the compliment to the City, I think it is generally agreed that conversion over the weekend of 1st January to 4th January went very well indeed. We have a substantial information campaign. We have had responses from more than 300,000 small and medium enterprises to the literature we sent out and we have had requests for further information. We have business advisers touring the country giving advice on how best to take advantage of the existence of the euro and we have made our public services as friendly as possible to the euro by saying that in Britain we can pay tax, we can file company returns and we can receive certain grants in euros.

§ Baroness Ludford
My Lords, perhaps I may press the Minister a little more to act as the champion of the British consumer. The fact is that more and more people will take euro travellers cheques on holiday. They will be widely advertised. The noble Lord said that there is competition among banks. I hear what he says but I understand from a report in the Financial Times that there are charges of up to 4 per cent. This is a grey area. Perhaps the noble 366 Lord should be a little more pro-active because we want to win those hearts and minds in a referendum. It would be unfortunate if people were to be put off the euro.

§ Lord McIntosh of Haringey
My Lords, with due respect, I have read the article in the Financial Times as well. I think that the noble Baroness has misunderstood it. The reference to commission of 3 or 4 per cent. is to Germany and Italy in particular and it refers to conversion between one country within euroland and another country. The noble Baroness's proper concern about the British consumer is largely about conversion between sterling and European countries. Very few British travellers spend a great deal of time or money converting from one euro 11 currency to another. For those who are not doing that, there is no significant difference in transaction costs. We have never said that a reduction in transaction costs is one of the principal benefits of European monetary union. It is a significant benefit. However, we are much more concerned with the longer-term benefits of macro-economic stability, to which we shall refer in more detail in Wednesday's debate.

Lord Bruce of Donington
My Lords, I accept the reassurance of Her Majesty's Government that they are doing their uttermost to inform the public as to the presumed workings of the new single currency system, but at the same time will the Minister give the House an assurance that they will be very careful in the interests of honest transparency to point out the dangers of such a course?

§ Lord McIntosh of Haringey
My Lords, I do not understand my noble friend's reference to the "presumed" change. The change has already taken place; the currency is already successfully in operation. Euros are used as the medium of exchange between 11 countries. As a country that has 50 per cent. of its trade with those 11 countries, it is proper that we should help consumers and business in this country to operate effectively with the new currency. The dangers would be to stay out and ignore the currency rather than the reverse.

§ Lord Swinfen
My Lords, will the noble Lord confirm that if it is the Government's intention to take this country into the euro, a referendum will be held to allow the voting public to have their say in the matter?

§ Lord McIntosh of Haringey
My Lords, the question of whether it is the intention of this Government to take this country into the euro is one that the Government will decide, based on the principles that we have set out. We have said that we are in principle in favour of British membership and that we see no overriding constitutional objection but that, subject to sustained convergence and 367 stability, we will put a proposition to Parliament and the British people. Therefore I can confirm that before that step is taken there will indeed be a referendum.

§ Lord Beloff
My Lords, will the advent of the single currency affect the degree of corruption which is manifest in the workings of the European Commission and which the European Parliament has signally failed to challenge?

§ Lord McIntosh of Haringey
My Lords, the noble Lord legitimately finds an opportunity to depart from the original Question. I do not know what proportion of the fraud that undoubtedly exists in European Community budgets arises from exchange transactions between the 11 different countries. If I knew the answer, that would be the answer to the noble Lord's question. But from what we know, I suspect that it is a relatively minor part of the abuses to which he properly draws attention.

§ Baroness Denton of Wakefield
My Lords, does the Minister agree that it would save time and energy if he arranged for the Treasury to send Members of this House a copy of the material that it sends to the public?

§ Lord McIntosh of Haringey
My Lords, that is a useful suggestion. If that view were shared by other noble Lords, I am sure that could be done. Meanwhile, any material that we send out is available to your Lordships either from the Printed Paper Office or in the Library. I shall report the noble Baroness's suggestion.